Question 1

Suppose a price-taking firm produces 400 units at its optimal output level. At that output rate, marginal cost is $200, average total cost is $240, and average variable cost is $170. The firm will be forced to go out of business in the short run if:​

Accepted Answer

A)  the market price equals $200 per unit.
B)  the market price is between $170 per unit and $240 per unit.
C)  the market price falls below $170 per unit.
D)  the market price is between $200 per unit and $240 per unit.
E)  the market price equals $240 per unit.F) B) and D)
G) C) and E)

Question 2

The total revenue curve for a perfectly competitive firm_____.​

Accepted Answer

A)  is a vertical line intersecting the horizontal axis
B)  is a horizontal line intersecting the vertical axis
C)  is a backward-bending curve
D)  is a straight line that starts from the origin and slopes upward
E)  starts at the origin, slopes upward at first, and then slopes downwardF) C) and D)
G) B) and E)

Question 3

If every firm in a market is a price taker, then which of the following is true?​

Accepted Answer

A)  There are a large number of sellers in the market.
B)  There are many substitutes of the products sold in the market.
C)  There is limited resource mobility.
D)  There are few consumers for the product being sold in the market.
E)  A few firms in the market have market power.F) A) and E)
G) A) and D)

Question 4

The golden rule of profit maximization states that firms maximize profit by producing at the level of output at which price equals average total cost.

Accepted Answer

A) True 
 B)False

Question 5

The demand curve facing a perfectly competitive firm is:​

Accepted Answer

A)  vertical at the equilibrium quantity.
B)  upward sloping.
C)  a straight line through the origin.
D)  a horizontal straight line at the market price.
E)  downward sloping.F) D) and E)
G) A) and B)

Question 6

If a perfectly competitive firm sells its product at the market price of $14 per unit, _____.​

Accepted Answer

A)  its marginal revenue is $14 and its average revenue is less than $14 per unit
B)  its marginal revenue is less than $14 per unit and its average revenue is also less than $14 per unit
C)  its average revenue is $14 and its marginal revenue is less than $14 per unit
D)  its average revenue is $14 and its marginal revenue is also $14
E)  its average and marginal revenue are $14 only for the first unit soldF) A) and E)
G) C) and D)

Question 7

The Hound Dog Bus Company contemplates expanding its New Mexico operations by offering services from Raton to Santa Fe. It has estimated that the total cost of the trip will be $400, of which $150 is the fixed cost, which it has already paid. The company expects an increase in revenue by $275 from the trip. The Hound Dog Bus Co. should:​

Accepted Answer

A)  offer this service because it will earn a positive economic profit.
B)  not offer this service because marginal revenue is less than marginal cost.
C)  offer this service because total revenue exceeds fixed cost.
D)  not offer this service because total cost exceeds total revenue.
E)  offer this service because the additional revenue exceeds the additional cost of this service.F) None of the above
G) D) and E)

Question 8

The long-run market supply curve for an increasing-cost, perfectly competitive industry _____.​

Accepted Answer

A)  is horizontal
B)  slopes upward
C)  is backward bending
D)  slopes downward
E)  is verticalF) A) and B)
G) B) and E)

Question 9

The relationship between price and quantity supplied after firms fully adjust to any short-term economic profit or loss resulting from a change in demand is illustrated by the _____.​

Accepted Answer

A)  long-run industry supply curve​
B)  Dutch auction model
C)  short-run firm supply curve
D)  constant-cost industry supply curve
E)  short-run industry supply curve​F) A) and B)
G) B) and E)

Question 10

An industry consists of all firms that supply output to a particular market.

Accepted Answer

A) True 
 B)False

Question 11

After an increase in demand in a constant-cost industry, the long-run average cost curves of firms shift upward.

Accepted Answer

A) True 
 B)False

Question 12

For perfectly competitive firms, which of the following correctly shows the relationship among market price (P) , average revenue (AR) , and marginal revenue (MR) ?​

Accepted Answer

A)  Price = Average revenue (AR)  = Marginal revenue (MR) 
B)  Price > Average revenue (AR)  = Marginal revenue (MR) 
C)  Price = Average revenue AR > Marginal revenue (MR) 
D)  Price = Average revenue (AR)  
E)  Price < Average revenue (AR)  = Marginal revenue (MR) F) C) and E)
G) All of the above

Question 13

Consider the following figure that shows a competitive firm on the left panel and a competitive market on the right panel. The movement along the curve S from point E to E' in the right panel of the figure represents: ​
Figure 8.8
​

Accepted Answer

A)  an increase in the number of firms in the industry.
B)  an increase in output supplied by each firm in the industry.
C)  both an increase in the number of firms in the industry and an increase in each firm's output.
D)  an increase in the cost of production for the firms in the market.
E)  an increase in total revenue of the representative firm from $8 to $12.F) B) and E)
G) A) and E)

Question 14

Assume a perfectly competitive firm incurs a total cost of $10,000, marginal cost of $38, and fixed cost of $2,000. It sells 200 units of its product at a market price of $38 per unit. Which of the following is true in this case?​

Accepted Answer

A)  The firm earns an economic profit of $7,600.
B)  The firm incurs an economic loss of $7,600.
C)  The average variable cost of production exceeds the market price.
D)  The average total cost of production is less than the market price.
E)  The firm earns an economic profit of $6,600.F) A) and C)
G) B) and C)

Question 15

If a manufacturer shuts down in the short run, it must be true that before the shutdown, at all positive output levels, _____. ​

Accepted Answer

A)  average total cost was less than average variable cost
B)  fixed cost was greater than total revenue
C)  variable cost was greater than total revenue
D)  profit was zero
E)  total cost plus total revenue was less than profitF) A) and E)
G) A) and B)

Question 16

Suppose a perfectly competitive firm and industry is in long-run equilibrium. A rightward shift of the market demand curve is likely to:​

Accepted Answer

A)  shift the demand curve facing the firm downward and increase the quantity supplied in the market.
B)  shift the demand curve facing the firm upward and not cause any change in the quantity supplied in the market.
C)  shift the demand curve facing the firm downward and increase the quantity supplied in the market
D)  shift the demand curve facing the firm upward and increase quantity supplied in the market.
E)  shift the demand curve facing the firm downward and not cause any change in the quantity supplied in the market.F) A) and D)
G) A) and B)

Question 17

Which of the following best approximates a perfectly competitive market structure?​

Accepted Answer

A)  Automobile manufacturing
B)  The insurance market
C)  Foreign exchange markets
D)  The airlines industry
E)  Manufacture of stereo equipmentF) None of the above
G) C) and E)

Question 18

Claude's Copper Clappers sells clappers for $40 each in a perfectly competitive market. At its present level of output, Claude's marginal cost is $39, average variable cost is $25, and average total cost is $45. To improve his profit or loss situation, Claude should:​

Accepted Answer

A)  increase output.
B)  reduce output but not to zero.
C)  continue to produce the present level of output.
D)  shut down.
E)  raise the price.F) C) and E)
G) B) and D)

Question 19

In the long run, the entry of new firms in a competitive industry:​

Accepted Answer

A)  drives up the equilibrium price.
B)  eliminates economic profits.
C)  reduces the equilibrium quantity.
D)  makes the demand curve facing each firm more inelastic.
E)  makes the market demand curve steeper.F) D) and E)
G) B) and E)

Question 20

In an increasing-cost industry, the entry of new firms _____.​

Accepted Answer

A)  decreases the equilibrium price​
B)  increases the average cost at each level of output
C)  shifts the industry demand curve to the left
D)  increases economic profits in the industry
E)  shifts the long-run industry supply curve to the rightF) A) and D)
G) All of the above

Exam 8: Perfect Competition

The golden rule of profit maximization states that firms maximize profit by producing at the level of output at which price equals average total cost.

Correct Answer
verified

In the long run, the entry of new firms in a competitive industry:

Correct Answer
verified

Assume a perfectly competitive firm incurs a total cost of $10,000, marginal cost of $38, and fixed cost of $2,000. It sells 200 units of its product at a market price of $38 per unit. Which of the following is true in this case?

Correct Answer
verified

After an increase in demand in a constant-cost industry, the long-run average cost curves of firms shift upward.

Correct Answer
verified

The total revenue curve for a perfectly competitive firm_____.

Correct Answer
verified

An industry consists of all firms that supply output to a particular market.

Correct Answer
verified

The demand curve facing a perfectly competitive firm is:

Correct Answer
verified

If a manufacturer shuts down in the short run, it must be true that before the shutdown, at all positive output levels, _____.

Correct Answer
verified

The long-run market supply curve for an increasing-cost, perfectly competitive industry _____.

Correct Answer
verified

The relationship between price and quantity supplied after firms fully adjust to any short-term economic profit or loss resulting from a change in demand is illustrated by the _____.

Correct Answer
verified

Which of the following best approximates a perfectly competitive market structure?

Correct Answer
verified

Claude's Copper Clappers sells clappers for $40 each in a perfectly competitive market. At its present level of output, Claude's marginal cost is $39, average variable cost is $25, and average total cost is $45. To improve his profit or loss situation, Claude should:

Correct Answer
verified

Suppose a price-taking firm produces 400 units at its optimal output level. At that output rate, marginal cost is $200, average total cost is $240, and average variable cost is $170. The firm will be forced to go out of business in the short run if:

Correct Answer
verified

If a perfectly competitive firm sells its product at the market price of $14 per unit, _____.

Correct Answer
verified

If every firm in a market is a price taker, then which of the following is true?

Correct Answer
verified

Suppose a perfectly competitive firm and industry is in long-run equilibrium. A rightward shift of the market demand curve is likely to:

Correct Answer
verified

Consider the following figure that shows a competitive firm on the left panel and a competitive market on the right panel. The movement along the curve S from point E to E' in the right panel of the figure represents: Figure 8.8

Correct Answer
verified

In an increasing-cost industry, the entry of new firms _____.

Correct Answer
verified

Correct Answer
verified

For perfectly competitive firms, which of the following correctly shows the relationship among market price (P) , average revenue (AR) , and marginal revenue (MR) ?

Correct Answer
verified

Exam 8: Perfect Competition

The golden rule of profit maximization states that firms maximize profit by producing at the level of output at which price equals average total cost.

Correct AnswerverifiedShow Answer

In the long run, the entry of new firms in a competitive industry:​

Correct AnswerverifiedShow Answer

Assume a perfectly competitive firm incurs a total cost of $10,000, marginal cost of $38, and fixed cost of $2,000. It sells 200 units of its product at a market price of $38 per unit. Which of the following is true in this case?​

Correct AnswerverifiedShow Answer

After an increase in demand in a constant-cost industry, the long-run average cost curves of firms shift upward.

Correct AnswerverifiedShow Answer

The total revenue curve for a perfectly competitive firm_____.​

Correct AnswerverifiedShow Answer

An industry consists of all firms that supply output to a particular market.

Correct AnswerverifiedShow Answer

The demand curve facing a perfectly competitive firm is:​

Correct AnswerverifiedShow Answer

If a manufacturer shuts down in the short run, it must be true that before the shutdown, at all positive output levels, _____. ​

Correct AnswerverifiedShow Answer

The long-run market supply curve for an increasing-cost, perfectly competitive industry _____.​

Correct AnswerverifiedShow Answer

The relationship between price and quantity supplied after firms fully adjust to any short-term economic profit or loss resulting from a change in demand is illustrated by the _____.​

Correct AnswerverifiedShow Answer

Which of the following best approximates a perfectly competitive market structure?​

Correct AnswerverifiedShow Answer

Claude's Copper Clappers sells clappers for $40 each in a perfectly competitive market. At its present level of output, Claude's marginal cost is $39, average variable cost is $25, and average total cost is $45. To improve his profit or loss situation, Claude should:​

Correct AnswerverifiedShow Answer

Suppose a price-taking firm produces 400 units at its optimal output level. At that output rate, marginal cost is $200, average total cost is $240, and average variable cost is $170. The firm will be forced to go out of business in the short run if:​

Correct AnswerverifiedShow Answer

If a perfectly competitive firm sells its product at the market price of $14 per unit, _____.​

Correct AnswerverifiedShow Answer

If every firm in a market is a price taker, then which of the following is true?​

Correct AnswerverifiedShow Answer

Suppose a perfectly competitive firm and industry is in long-run equilibrium. A rightward shift of the market demand curve is likely to:​

Correct AnswerverifiedShow Answer

Consider the following figure that shows a competitive firm on the left panel and a competitive market on the right panel. The movement along the curve S from point E to E' in the right panel of the figure represents: ​ Figure 8.8 ​

Correct AnswerverifiedShow Answer

In an increasing-cost industry, the entry of new firms _____.​

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

For perfectly competitive firms, which of the following correctly shows the relationship among market price (P) , average revenue (AR) , and marginal revenue (MR) ?​

Correct AnswerverifiedShow Answer

Correct Answer
verified

In the long run, the entry of new firms in a competitive industry:

Correct Answer
verified

Assume a perfectly competitive firm incurs a total cost of $10,000, marginal cost of $38, and fixed cost of $2,000. It sells 200 units of its product at a market price of $38 per unit. Which of the following is true in this case?

Correct Answer
verified

Correct Answer
verified

The total revenue curve for a perfectly competitive firm_____.

Correct Answer
verified

Correct Answer
verified

The demand curve facing a perfectly competitive firm is:

Correct Answer
verified

If a manufacturer shuts down in the short run, it must be true that before the shutdown, at all positive output levels, _____.

Correct Answer
verified

The long-run market supply curve for an increasing-cost, perfectly competitive industry _____.

Correct Answer
verified

The relationship between price and quantity supplied after firms fully adjust to any short-term economic profit or loss resulting from a change in demand is illustrated by the _____.

Correct Answer
verified

Which of the following best approximates a perfectly competitive market structure?

Correct Answer
verified

Claude's Copper Clappers sells clappers for $40 each in a perfectly competitive market. At its present level of output, Claude's marginal cost is $39, average variable cost is $25, and average total cost is $45. To improve his profit or loss situation, Claude should:

Correct Answer
verified

Suppose a price-taking firm produces 400 units at its optimal output level. At that output rate, marginal cost is $200, average total cost is $240, and average variable cost is $170. The firm will be forced to go out of business in the short run if:

Correct Answer
verified

If a perfectly competitive firm sells its product at the market price of $14 per unit, _____.

Correct Answer
verified

If every firm in a market is a price taker, then which of the following is true?

Correct Answer
verified

Suppose a perfectly competitive firm and industry is in long-run equilibrium. A rightward shift of the market demand curve is likely to:

Correct Answer
verified

Consider the following figure that shows a competitive firm on the left panel and a competitive market on the right panel. The movement along the curve S from point E to E' in the right panel of the figure represents: Figure 8.8

Correct Answer
verified

In an increasing-cost industry, the entry of new firms _____.

Correct Answer
verified

Correct Answer
verified

For perfectly competitive firms, which of the following correctly shows the relationship among market price (P) , average revenue (AR) , and marginal revenue (MR) ?

Correct Answer
verified